Indian Rupee slips ahead of US Fed FOMC meeting: Is further depreciation on cards? Analysts estimate this

Rupee vs Dollar: Ahead of US Fed FOMC (Federal Open Market Committee) meeting decision, the Indian Rupee on Wednesday declined by 26 paise to close at 80.00 (provisional) against the US dollar in the overseas market and a muted trend in domestic equities. 

As per forex traders, investors are awaiting the US Fed's policy decision on interest rates for further cues, besides, risk-off mood and firm crude oil prices weighed on the local unit, PTI reported. 

Most of the analysts estimated that the domestic currency may move beyond the 80-mark post the US Fed decision, which is scheduled on September 21, 2022. The US Fed is likely to hike by 75 basis points and sound quite hawkish, the experts predicted.  

Rupee to significantly appreciate against the US Dollar, USD has to weaken. We could see USDINR slowly moving higher towards 80.40/50 levels on spot, Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities said. 

“Barring Fed, the bigger play in the US Dollar Index remains the energy crises in Europe and Chinese economic slowdown. These negative factors could ensure that over the medium-term US dollar appreciates further against its peers, including the Rupee,” Banerjee added in a comment. 

More than the rate decision, the markets would be closely eyeing economic projections by the US Fed which will provide further direction to the Indian rupee, Sugandha Sachdeva, Vice President - Commodity and Currency Research, Religare Broking said in her comment. 

“As the domestic currency is trading just shy of the crucial 80 to the dollar mark, we envisage it to provide a cushion to the local unit. On the contrary, a decisive breach of the 80.10 mark would fuel further depreciation in the rupee-dollar exchange rate,” Sachdeva further said in a comment. 

While Sandeep Bagla, CEO, TRUST Mutual Fund said, “Indian Rupee has come under pressure as the FPI flows slowed down and there is pressure from expanding current account deficit as well.  RBI is estimated to have spent $80-90 bn to keep the Rupee at current levels against the USD.” 

If USD were to strengthen further, RBI may decide to let the Rupee weaken a bit and the trading range could shift to the 79-81-mark, Bagla said in his comment further.  

In August, the rupee had fallen to its all-time low of 80.15 against the US dollar. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.31 per cent higher at 110.55.  

Brent crude futures, the global oil benchmark, fell by 2.36 per cent to USD 92.76 per barrel. 

Foreign institutional investors were net buyers in the capital market on Tuesday as they purchased shares worth Rs 1,196.19 crore, as per exchange data.